Harris v. Amgen

The fiduciary duty of care and loyalty under the Employee Retirement Income Security Act ("ERISA") is breached when a fiduciary continues to offer company stock as an investment alternative when it knew or should have known the stock's artificially inflated value; appointment of a trustee is not a clear delegation of exclusive authority by the fiduciary for purposes of defeating ERISA fiduciary status.

Amgen Inc. ("Amgen") researches and manufactures drugs to treat anemia. Plaintiffs are a class of former and current employees of Amgen who participated in two employer-sponsored pension plans ("the Plans"). The Plans were employee stock-ownership plans and included holdings in the Amgen Common Stock Fund which held only Amgen common stock. Between the 1990s and early 2000s multiple clinical trials and studies of Amgen’s anemia drugs produced negative results which Amgen later made material misrepresentations or omissions about, artificially inflating their common stock price. Discovery and publication of the misrepresentations and omissions resulted in a drop of Amgen’s common stock by one-third. Plaintiffs sued Amgen, Amgen’s board, and the Fiduciary Committees of the Plans alleging breaches of fiduciary duties under the Employee Retirement Income Security Act ("ERISA"). The district court dismissed complaints applying the “presumption of prudence” according to Quan v. Computer Sciences Corp. and alternatively assuming absence of the presumption found no breach of fiduciary duties. The district court determined Amgen was not a fiduciary. The Ninth Circuit held that the defendants were not entitled to a presumption of prudence under Quan because the language of the Plans did not “require or encourage the fiduciary to invest in employer stock.” Further, the panel held that defendants breached the Prudent Man Standard of Care because they knew or should have known about the material omissions and misrepresentations that were artificially inflating stock price while still offering Amgen common stock as an investment alternative. Second, the panel held that defendants both owed and breached a duty of loyalty under ERISA to provide information to plan participants about investment in the Amgen common stock fund by failing to do so. Finally, defendant’s appointment of a trustee was not a clear delegation of exclusive authority by the fiduciary and thus Amgen still had fiduciary status under ERISA. REVERSED and REMANDED.